Transportation is one of the world’s largest industries. Its sectors range from taxis to trucks, airplanes, trains, courier services, ships, barges, warehouses and logistics services.
In total, during 2013, core transportation revenues in the U.S. were $950.6 billion according to Plunkett Research estimates. Worldwide, these revenues were approximately $4.5 trillion. This includes air, rail, water, pipeline, courier and warehousing segments. (If you look at transportation in the broadest possible terms, the U.S. transportation industry, in both for-hire and not-for-hire sectors, including support and repair, generated revenues of about $2 trillion for 2013, according to Plunkett Research estimates.)
At about 6% of economic activity, transportation’s core activities add up to a remarkably efficient industry, considering the fact that it is a vital service to every other sector of the economy. In fact, thanks to increasing use of advanced information systems and such strategies as intermodal containers (sending freight via containers that are easily transferred from ship to rail car to truck as needed, without repacking), the transportation industry’s productivity is excellent.
Financial results at global shipping giants FedEx and United Parcel Service (UPS) are good indicators of the health of transportation revenues in general. FedEx, which provides a wide variety of freight and package delivery services in 220 nations worldwide, delivers some 9 million packages daily. FedEx revenues grew a mere 3.7% in 2013 to $44.2 billion, after an 8.6% rise the previous year. In early 2013, it warned of slowing growth in China and softening demand for air freight from China to North America.
Over recent years, globalization placed intense new demands on the transportation and supply chain sector. For example, UPS offers delivery worldwide, and international revenues have been key to its growth. UPS saw revenue growth of only 2.4% in 2013 to $55.4 billion. However, it enjoyed stellar profits of $4.3 billion.
Transportation continues to evolve, no matter whether the type of transport involved is on the road, on the sea or in the air. For example, China had only about 200 kilometers of expressways in 1989. Today, it has a massive system of state-of-the-art highways surrounding the nation’s largest cities. India, the world’s second most populous nation, is woefully behind in transportation infrastructure, especially highways, but has hopes to dramatically boost construction in this regard with some funding to come from public-private partnerships. Other emerging nations, including Brazil, must focus on infrastructure development as well, including ports and airports, or risk seeing their economic growth derailed. Brazil took steps in 2012 to improve its aging major airports by selling a majority stake in three of them (in Sao Paulo, Campinas and Brasilia) to private operators who will make massive investments to modernize them in time for Brazil’s 2016 Summer Olympic Games. The growth in Brazil’s transportation needs has been typical of that in other rapidly emerging nations. Brazil’s air traffic rose by 118% from between 2003 and 2010, nearly three times the global average.
The information age, with its introduction of sophisticated databases that can track inventory levels and shipments on a global basis via the Internet, has created vast transport and logistics efficiencies. As a result, supply chain technology has been one of the fastest-growing segments in the information field.
Next, the rapid adoption of outsourcing has led many companies, when shipping is vital to their businesses, to turn to logistics services providers for all manner of shipping support, including warehousing, scheduling and distribution services. The sectors of transport, supply chain management and logistics services are permanently intertwined, creating efficiencies once undreamed of in the transportation arena.
All nations worldwide face a daunting task in maintaining airports, seaports, highways and railroads that can handle commerce and passenger traffic efficiently. The amount of government funds available for roadway development is never enough to keep up with long-term needs. For example, researchers at Texas A&M University’s Texas Transportation Institute estimate that traffic delays cost the U.S. economy $121 billion in 2011 alone, thanks to billions of man-hours lost to frustrating traffic slowdowns, as well as 2.9 billion gallons of gasoline wasted.
One of the biggest challenges facing the global transportation sector over the mid- to long-term is a focus on lowering carbon emissions and enhancing energy efficiency. (In the U.S., the transportation sector, as of 2011, was estimated to create 28% of all carbon dioxide emissions.) Airlines have placed large orders for fuel-efficient jets like Boeing’s new 787, promising efficiency gains of 15% to 20% per passenger mile. Container ship operators are under intense pressure to reduce contamination and emissions while in port and at sea, and the latest designs, such as Maersk’s massive new Triple-E class of ships, are making huge strides in this regard. Automobile and truck manufacturers are struggling to respond to demand for fuel-efficient vehicles.
Tremendous strides in green technology are also being made throughout the transportation services and transport equipment sectors. Lee Schipper, a Senior Engineer at the Precourt Energy Efficiency Center at Stanford University, points out that air transportation in developed countries today uses 50% to 60% less energy per passenger-kilometer travelled than it did in the early 1970s, and trucking uses 10% to 25% less fuel per ton-kilometer. Additional developments in transportation include the use of natural gas and electricity to fuel public transportation and the development of energy-efficient light rail.
Meanwhile, consumers and government transportation agencies worldwide have a renewed interest in high-speed trains and other forms of rapid transit. Trains in many parts of the world are enjoying booming times. Also, rising fuel costs compel high numbers of consumers to turn to buses and other forms of mass transit for their commutes, leaving their gas-guzzling cars at home. Ridership of public transit is soaring in many cities, due to several factors, including traffic congestion and costs of private car ownership, and new light rail (such as the system in Denver, Colorado) and subway systems (such as new projects in New Delhi and Mumbai, India.) The American Public Transportation Association estimates that transit ridership grew by 37% from 1995 to 2013, compared to only 23% in vehicle miles traveled.
Another massive change is the growing interest of governments in outsourcing their transportation infrastructure to private operators and private ownership, often in public-private partnerships. Governments are short of cash. In some cases, they are selling or leasing toll bridges and highways to private operators, reaping cash windfalls in the process. (Chicago, Illinois, infamously sold a long-term lease on rights to collect funds from its parking meters, reaping $1.16 billion in cash up front, much to the chagrin of the city’s residents.) Elsewhere, governments are outsourcing their long-term highway development needs to private operators who will build new toll roads, relieving government of the investment burden while potentially creating large profits for the private operators.